Summary
Workday's fiscal 2022 third quarter delivered a sharp swing to GAAP profitability. Total revenues were $1.33 billion, up 20.0% from the prior-year quarter. Operating income was $23.94 million, or 1.8% of revenues, compared with an operating loss in the prior-year quarter. Net income was $43.41 million, compared with a net loss a year earlier. Diluted earnings per share was $0.17, compared with a diluted loss per share a year earlier. On a non-GAAP basis, operating income was $332.2 million, or 25.0% of revenues, compared with $268.1 million, or 24.2% of revenues, in the prior-year quarter. Non-GAAP diluted net income per share was $1.10, compared with $0.86.
The nine-month picture also improved. Total revenues for the nine months ended October 31, 2021, were $3.76 billion, up 18.1%. Net income was $102.63 million, compared with a net loss in the prior-year period. Diluted earnings per share was $0.40, compared with a loss per share in the prior-year period. Operating margin was negative 0.4%, up from the prior-year period. Operating cash flow was $384.65 million for the quarter, up from the prior-year quarter. For the nine months, operating cash flow was $1.04 billion, up from the prior-year period. Deferred revenue was $2.42 billion, up 21.1% from a year earlier. The deferred revenue figure is the current portion only. Total subscription revenue backlog was $10.97 billion, up 23.7%, and 24-month subscription revenue backlog was $7.12 billion, up 19.7%.
Operational highlights were broad. Workday announced its intent to acquire VNDLY, a cloud-based external workforce and vendor management provider. It acquired Zimit, a configure price quote solution built for services industries. It introduced Workday Scheduling and Labor Optimization, and nearly 1,000 organizations use Skills Cloud. Workday Everywhere was launched to bring Workday tasks and insights into digital workspaces. Peakon was rebranded as Workday Peakon Employee Voice. Workday was named a Leader in the 2021 Gartner Magic Quadrant for Cloud HCM Suites for 1,000+ Employee Enterprises for the sixth consecutive year and positioned highest for overall Ability to Execute. Workday Financial Management received the Gartner Peer Insights Customers' Choice 2021 Distinction. Leadership changes included Doug Robinson's promotion to co-president, Barbara Larson becoming CFO on Feb. 1, 2022, Pete Schlampp as chief strategy officer, and Sayan Chakraborty as executive vice president of Product and Technology.
Guidance points to continued growth. Management raised fiscal 2022 subscription revenue guidance to a range of $4.533 billion to $4.535 billion, growth of 20%. For the fourth quarter, it expects subscription revenue of $1.216 billion to $1.218 billion, growth of 21%. It also raised fiscal 2022 non-GAAP operating margin guidance to 22%. The company disclosed future noncancelable minimum payments of approximately $761 million under third-party hosted infrastructure agreements as of October 31, 2021, and lease payments of $313 million. It also listed purchase obligations of $162 million for data center equipment and a ten-year sporting event sponsorship agreement with future noncancelable minimum payments of approximately $144 million.
Risks remain substantial. The COVID-19 pandemic continues to create uncertainty and could hurt new business, customer renewals, sales and marketing, revenue growth, customer deployments, customer solvency, and product development. The pending VNDLY acquisition may not close in a timely manner or at all, and expected benefits may not be achieved. Security breaches, unauthorized access to customer or user personal data, and disruptions in data center or computing infrastructure operations are named risks. Service outages, deployment delays, and application performance problems could also harm results. Competition includes pricing pressures, industry consolidation, new competitors, new applications, technological advances, and competitor marketing. Other risks include the development of the enterprise cloud market, customer acceptance of new features, adverse economic conditions, regulatory risks related to new technologies, delays in IT spending, and changes in sales that may not be immediately reflected because of the subscription model. The MD&A notes Workday has incurred GAAP operating losses each fiscal year since inception in 2005, and it expects product development, sales and marketing, and general and administrative expenses as a percentage of total revenues to decrease over the longer term as revenues grow. Near-term margin favorability from revenue growth outpacing headcount growth and COVID-19 related expense moderation may not continue long-term. The 2022 Notes are convertible at the option of holders during the fourth quarter of fiscal 2022, and the principal balance converted or requested so far is not material.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.33B | $1.26B | +5.3% | $1.11B | +20.0% |
| Research & development | $455.6M | $444.3M | +2.6% | $420.0M | +8.5% |
| Sales & marketing | $366.3M | $358.2M | +2.3% | $302.9M | +21.0% |
| General & administrative | $121.7M | $113.6M | +7.1% | $102.0M | +19.2% |
| Total operating expenses | $1.30B | $1.26B | +3.3% | $1.12B | +16.4% |
| Operating income (loss) | $23.9M | -$1.1M | +2237.9% | -$14.1M | +270.1% |
| Operating margin | 1.8% | -0.1% | +1.9 pp | -1.3% | +3.1 pp |
| Net income (loss) | $43.4M | $105.7M | -58.9% | -$24.3M | +278.4% |
| Net margin | 3.3% | 8.4% | -5.1 pp | -2.2% | +5.5 pp |
| Diluted EPS | $0.17 | $0.41 | -$0.24 | — | — |
Risks
The ongoing COVID-19 pandemic continues to create uncertainty and could again reduce new subscription bookings, customer demand, renewals, and revenue growth. Workday previously reduced its fiscal 2022 subscription revenue outlook due to unfavorable impacts on new subscription bookings and experienced delayed purchasing decisions and reduced demand in travel and hospitality, plus lower renewal rates in small and medium-sized planning customers.
Long sales cycles for large customers mean new sales are recognized ratably and may not be immediately reflected in operating results. Large customers have requested and may continue to request greater price concessions and delayed payment terms, and travel and in-person meeting restrictions could continue to interrupt sales activity.
Competition for engineers with machine learning and artificial intelligence experience, cybersecurity professionals, and senior sales executives is intense, especially in the San Francisco Bay Area. Workday also committed to increasing its workforce by more than 20% in fiscal 2022, which strains management and hiring capabilities.
The enterprise cloud applications market is intensely competitive, with Oracle and SAP as primary competitors plus UKG, ADP, Infor, Ceridian, Microsoft, Anaplan, and Coupa. Legacy vendors are expanding cloud offerings through acquisitions and alliances, and competitors may offer lower prices or more attractive terms, pressuring Workday's margins and market position.
In April 2021, a malicious third party accessed the development environment of recently acquired Peakon and took a copy of Peakon's source code following a security breach at a software provider. Workday took remediation steps, but the incident and increased remote-work attack surface may not be fully eliminated and could lead to customer losses, liabilities, or reputational harm.
The convertible senior notes due October 1, 2022 are convertible at the option of holders during the fourth quarter of fiscal 2022, and Workday may receive conversion requests requiring settlement. The Credit Agreement also imposes covenants including a leverage ratio, and substantial debt could limit financial flexibility or require cash that would otherwise fund operations.
Workday relies on third-party data centers and hosted infrastructure partners including Amazon Web Services, Microsoft, and Google. Capacity constraints, service outages, provider financial difficulties, or failure to renew agreements could cause service interruptions, service credits or refunds, contract terminations, and customer dissatisfaction.
Workday acquired Peakon and Zimit in fiscal 2022 and expects to continue acquisitions. Integrations may divert management attention, disrupt operations, fail to retain acquired personnel, introduce unknown liabilities or security risks, and result in impairment charges or dilution.
Workday holds equity investments and recognized gains on equity investments in other income, net during the quarter and nine months ended October 31, 2021, including gains tied to an equity investment that completed its IPO and the Zimit acquisition remeasurement. Valuations of non-marketable equity investments are complex and changes in fair value or impairments could cause material volatility in results.
Although Workday swung to GAAP profitability in the quarter and year to date, it had historically incurred net losses since inception and expects operating expenses to increase. Recent GAAP profitability may not be indicative of future performance, and customer acquisition costs are generally incurred up front while subscription revenue is recognized ratably.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total Subscription Revenue Backlog
Non-GAAP Operating Income
24-Month Subscription Revenue Backlog
Subscription Revenue
Total Revenues
Operating Cash Flow
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q3 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.